(Clarifies in fourth paragraph that 43 percent of analysts, and
not a majority, rated SolarWorld a "buy")
(For more BUY OR SELL stories, click [BUYSELL/])
* Bears see buyback adding to balance sheet risks
* Bulls see weak euro, strong demand as share price triggers
By Christoph Steitz
FRANKFURT, May 20 SolarWorld's SWVG.DE share
buy-back has renewed investor interest in the company's stock,
which hit a four-year low last week after first-quarter profit
missed estimates. [ID:nWEA1455]
Solarworld, Germany's biggest solar company by revenue, said
on Thursday that so far it had bought back 1.4 million shares at
an average price of 9.46 euros ($11.75). It plans to buy back up
to 10 percent of the company's share capital. [ID:nWEA3255]
Solarworld shares were up 1 percent at 8.77 euros by 1000
GMT on the Frankfurt bourse.
The shares, which have recovered slightly from last week,
may look cheap, but 43 percent of analysts, the biggest group,
polled by Thomson Reuters StarMine rated the stock a "hold",
leaving investors wondering whether now is a good time to buy.
Bears have cautioned that the buy-back could have a negative
impact on SolarWorld's balance sheet, while bulls see a
weakening euro and strong demand in Germany, the world's largest
market, as a reason to own the stock.
BALANCE SHEET RISKS
Bank of America Merrill Lynch analyst Matthew Yates has
rated the stock "underperform", writing in a note that while the
company had the liquidity to do the share buyback he saw net
debt rising to 450 million euros by the end of 2010 and 650
million by the end of 2011, from 296 million at the end of
"Leverage was already a concern for us and seeing the
company spending a further 100 million euros to buy back stock
would only heighten our worries," Yates wrote.
UniCredit analyst Michael Tappeiner, who is keeping a "sell"
rating on the stock, also sees net debt increasing and warned
that weak fundamentals -- most importantly the cut in solar
subsidies in Germany from July -- could become a problem for the
"In addition, German FiT (feed-in tariff) cuts could amount
up to 13 percent in Jan 2011, which would reinforce price and
margin pressure in 2011," he wrote.
WEAK EURO, STRONG DEMAND
Analysts at Exane BNP Paribas have kept their "outperform"
rating on SolarWorld -- one of the few profitable solar players
in Germany -- pointing to a weakening euro which could boost the
company's business abroad.
"Despite regulatory uncertainty in Europe ... which could
affect PV (photovoltaic) demand/pricing as soon as H2 10, the
current euro weakness is quite positive for European
competitiveness," they wrote.
Bryan, Garnier & Co analyst Ben Lynch also sees upside for
the company, noting that customers are bringing forward their
orders ahead of subsidy cuts that come into effect in the middle
of the year and saying it had an "unchallenging valuation".
"While SolarWorld's (first-quarter results) were
disappointing, we expect that positive (first-half) fundamentals
... will prove more sustainable than bearish market
expectations," he wrote, reiterating his "buy" rating.
(Editing by Karen Foster)